New Technology Key Driver in Future: Interview with PHH's Mark Miller

Mark Miller has readied the midpoint of his second year as president and CEO of PHH Vehicle Management Services. AF's Mike Antich recently interviewed him to get an update on his vision for the fleet management company's growth in the forthcoming years.

AF: When you became president of PHH Vehicle Management Services, you said that one of your key business objectives was to broaden your service offerings. Looking back on the past year, how have you fare d in achieving this goal and how are you planning to build upon it in the coming year?

Miller: I've been very pleased with our success in broadening our services, both in North America and abroad. I'll cite just a few examples. One area where we're really going gangbusters is in the accident and risk management program. In the past year it's grown at better than 25 percent in the number of vehicles it services, and we've been very pleased with the amount of money we've been able to recover for our clients-an increase of more than 40 percent to S8.5 million in subrogation by the end of 1998. We've begun marketing our accident and risk management services to the insurance industry and non-PHH fleets, and we are successfully selling it as a stand-alone product.

The second area I would like to talk about is our new MasterCard product, the Cendant Card. It's growing rapidly, We've made outstanding progress recently in working with national service providers to capture detailed maintenance information when drivers use their Cendant MasterCard. We recently introduced a rewards program, which helps companies leverage their purchasing volume with travel and entertainment suppliers, as well as fleet purchases. Card holders get reward points for doing a better job of complying with their company policy, and they can redeem those points for things like airplane tickets.

Another key area is used-vehicle sales, where we continue to break new ground. Specifically, we've just opened new marketing centers in New York, South Carolina, and Tennessee. The concept of a marketing center has been around for some time, and has been a very successful model for us in Canada for about 10 years. Now we're adapting it to the US, market. It basically operates from a modern retail automobile sales facility, and sells used vehicles to the retail public as well as to wholesale dealers. It's owned and operated by a PHH Preferred Dealer, displays PHH signage, and features PHH used vehicles in all of its advertising. We've found that the average sales price is significantly higher than what we'd expect to get through normal wholesale channels. We also plan to open marketing centers in California, Florida, Maryland, Arizona, Texas, Michigan, and Washington.

Another growing used-vehicle sales channel is retail consignment. In the past year we've added almost 100 consignment dealers to our network. We've more than doubled the number of vehicles we're selling through this channel, and we're seeing an average of $200 to $400 more per vehicle.

In Canada, our salvage management area, which basically markets total loss recovery service to the insurance industry, has expanded now into the U.S. and is growing at 40 percent.

Let me touch on a few things we're doing in Europe. As you know, we're a very large player in the corporate charge card/fleet card arena in Europe. We've launched a purchasing card program that's literally doubled its volume in the past year, and we're looking at near triple-digit growth for 1999 as well.

In the UK, we've had tremendous success with our Truckmaster program, which provides a full maintenance management service for commercial vehicles. It's grown 58 percent in the number of trucks under management, and we're looking at that kind of growth again in 1999. So in terms of broadening our service based offerings, I'm happy with our progress.

AF: Another objective during your first year as president was to implement new technology. How did you fare in achieving this objective?

Miller: Obviously first on the list would be PHH InterActive, which has become a real game-changer for us. And, we think, not just for PHH, but in a lot of ways it's setting the standard for the entire fleet industry. Our data warehouse and the Internet applications have opened up whole new vistas in how we and our clients do business. From a big picture standpoint, it increases client productivity and offers major cost takeout opportunities, while making us more productive internally. In fact, PHH has been nominated for a ComputerWorld Smithsonian Award for our innovative data warehouse with Internet access. Past nominees of these awards include Amazon.com, Lucent Technologies, and Microsoft Corp., so we're in good company.

Also, in today's environment, our sales account management teams are equipped with powerful desktop tool kits that use computer models allowing them to answer a wide variety of questions on the spot. When a client asks us when is the best time to replace vehicles, or what does it cost to administer personal use taxable benefits, or what would be the impact if a policy were changed, we can give them an answer in real-time based on years of experience, using a sophisticated computer model. That takes our consultative services to a new level.

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On the international front, we've enhanced our video imaging technology, which is used in body shops to expedite insurance claims. This productivity enhancer has helped us double our volume in this area. We're also rolling out a number of electronic commerce links with major maintenance suppliers to speed the authorization process. Last, but not least, we've introduced Miledger, which makes use of advanced smart card technology to help clients track personal versus business use of a vehicle.

AF: What new features and capabilities do you envision in the next generation of PHH InterActive?

Miller: We had another release in January that included a number of new features. I'll just highlight a couple of them: data on demand, which enables fleet managers to extract information from any area of our data warehouse and bring it to their own desktop for manipulation. We've also dramatically increased our vehicle ordering functionality. Basically, we rolled out the plain vanilla version last fall; then in January we introduced the hot fudge sundae with all the toppings. Using PHH InterActive, fleet managers are now able to do everything that Fleet Line (fleet management system) ever did, but more conveniently and a lot faster. Looking a little further ahead, we're developing push technology, where we'll proactively push pertinent information out to the fleet manager's desktop on a real time basis.

PHH InterActive has truly been a quantum leap forward for our business. It seems like everybody now has some kind of Internet product on the market, but our data warehouse architecture and infrastructure gives us a tremendous advantage. We're developing new products in 60 days, not the proverbial two man years, thanks to the way we created the data warehouse. It gives us a lot of flexibility, and allows us to extend our technology leadership well into the future.

Let's face it: in the large corporate market, particularly, information and technology are at the top of everyone's list, along with service. We haven't yet had one client or prospect that, quite frankly, wasn't blown away by what we're doing and we're talking to some pretty sophisticated customers.

AF: Your third business objective was to expand the company internationally. What progress have you made in this area during your first year?

Miller: In addition to the Harpur (fuel card) acquisition in the UK, we've significantly expanded our German operation, which will soon be entering. Austria and Switzerland in third quarter 1999. In the past year, we've also consolidated and expanded our partnership relationships to give us comprehensive fleet management capabilities in Australia, New Zealand, and South Africa.

In terms of growth, our Canadian business is growing at greater than 20 percent a year, and our European business continues to grow at upwards of 20 percent annually. Our international operations are increasing and becoming a larger part of the whole PHH picture. In addition, there's a great deal of potential in the Pacific Rim and Brazil. We're involved in discussions and actively reviewing opportunities there.

AF: How will technology help expand your ability to provide global fleet management?

Miller: We view globalization as going beyond bricks and mortar, or offices in every country. In talking to our clients, we've found that globalization means different things to different companies.

The one common denominator is that virtually all companies are looking for timely, comprehensive information from far-flung operations. Gelling that information can be very, very difficult, particularly wild some of the legacy computer issues that companies have.

We believe the next breakthrough in globalization will come from being able to capture and access this information through a central repository such as are PHH InterActive and data warehouse

For example, we're experimenting with taking data from a number of different sources, particularly with a client that may be in a transition mode to PHH from a couple of other suppliers. We can take data feeds from third parties through the data warehouse and provide seamless management information reporting.

What does that mean on a global basis? I think the possibilities, are limitless. Technology is going to make it possible to manage more business on a global basis belter, cheaper, and faster. Our technology infrastructure has the capability to be a real change-driver in this arena.

AF: Is PHH planning on expanding its use of Cyberlots to remarket its vehicles? How would you assess the initial success of remarketing vehicles via the Internet?

Miller: We're currently using an Intranet with our Cyberlot through Manheim Auctions. We've sold a number of vehicles using this method, and we expect it to pick up in volume as more buyers begin purchasing vehicles via the Web.

In addition, we're developing an Internet capability on our own website, phh.com, to link to retail consignment dealers in our network. As I mentioned before, we're developing several marketing centers around the country, and those dealers may have an Internet presence in the retail market. We plan to work closely with our network of service providers to make the Internet a viable, and eventually a powerful, remarketing channel.

AF: In 1997, you foresaw a number of synergies resulting from PHH's ownership by Cendant. Have these synergies materialized?

Miller: There are a number of areas where we've achieved very solid progress.

First, in the area of cross-marketing to our common clients. We're seeing more of our clients who are becoming part of the Cendant Preferred Alliance membership.

If you look over the last year, we've achieved synergies through the various acquisitions in the UK such as the Harpur Group, the pending RAC acquisition, Green Flag, and National Car Park. All of these offer us the opportunity to touch more drivers with more services. We're now as, company, touching more than five million drivers on a global basis.

We're continuing to work with Avis and WizCom on vehicle ordering synergies and technology, and thanks to Cendant. We have a broader industry presence in the automotive sector, if you look at our company as a whole, we know manage over one million vehicles: we buy over 300.000 vehicles a year and through Auto Vantage, we channel an additional 60,000 buyers a month into dealerships to make automobile purchases. So it's a big advantage to us in terms of industry presence, clout, relationships with key suppliers, and our ability to leverage these for our clients.